What is a Capital Reduction Demerger?
A capital reduction demerger is a method of corporate restructuring that involves reducing a company’s share capital and then dividing its business operations into separate entities without the need for a sale to a third party. For example, property or other assets can be separated from a trading business. This creates distinct business units operating independently.
This strategic approach allows companies to streamline their operations, sharpen their focus, and enhance shareholder value. It can be used as a method to protect the assets of a company, or it can be done to streamline a division of the business ready for a sale.
Benefits for your business
- Enhanced Shareholder Value: Shareholders gain direct ownership in the demerged entity, allowing them to benefit directly from different parts of the business.
- Simplified Corporate Structure: Each business unit can operate independently, improving operational clarity and efficiency.
- Tax Efficiency: Proper structuring can minimise tax liabilities for both the company and its shareholders.
Our experienced corporate law team is here to guide you through the legal stages of the demerger process, ensuring a smooth and compliant transition. We work with experienced external tax advisers, who will be responsible for the tax clearance and advice, or we can work with your advisers.
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